Saturday 6 June 2020

Egypt firms see easing of cost inflation pressure

CAIRO, December 6, 2018

Cost inflationary pressures at Egyptian private sector firms eased to record low in November, according to latest data from the Emirates NBD Purchasing Managers’ Index (PMI) for Egypt.

The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the Egyptian private sector.

Khatija Haque, Mena economist at Emirates NBD, said: “The recovery in the headline PMI in November to a three-month high is encouraging, although the overall survey still points to soft business conditions for the private sector in Egypt.  Although the declines in output and new work were relatively modest, the employment index fell to its lowest level since March.  More positively, inflationary pressures appear to be easing.”
Key main findings of the November survey:

•    Output prices unchanged in November as cost inflation moderates
•    Softer declines in output and new orders
•    Employment falls at joint-quickest rate in 12 months

The seasonally adjusted Emirates NBD Egypt Purchasing Managers’ Index (PMI) – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – rose from 48.6 in October to 49.2 in November, signalling the softest worsening of business conditions during the recent three-month sequence of deterioration.

The downturn was led by a further decline in new orders during November, as Egyptian firms found that challenging economic conditions continued to weigh on demand. However, the drop in orders was slower than in October and only marginal overall. Similarly, output contracted for the third consecutive month but at a weaker pace. New export orders also fell, with the rate of decrease slightly quicker than in October.

Despite falling demand, capacity pressures continued to build, as backlogs of work rose for the fifth month in a row. Some firms highlighted skill shortages, which was captured by the Employment Index dropping to its joint-lowest reading in a year. That said, other respondents actively reduced staff due to falling demand.

In regard to prices, Egyptian non-oil private sector firms recorded the slowest uptick in input costs seen across the series, which began in April 2011. While firms mentioned increased raw material, electricity and transport costs, the majority of panellists experienced no change in outlays in November.

As a result, output prices were relatively unchanged, with the index posting only fractionally above the neutral 50.0 mark. Anecdotal evidence revealed that some companies refrained from price hikes amid efforts to boost new work.

Looking ahead, sentiment moderated to its weakest position in 25 months. Following a more optimistic start to the year, recent survey periods suggested a less upbeat outlook at Egyptian firms. That said, overall sentiment was positive, with many companies hoping that market stability will encourage demand to pick-up in the future, boosting business activity. – TradeArabia News Service

Tags: Egypt | Private sector | PMI | ENBD |

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